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Exam 6: Cash and Internal Controls

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Question 31

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A key factor in a voucher system includes all of the following except:

A) Only approved departments and individuals are authorized to incur an obligation that will result in the payment of cash.
B) Procedures for purchasing, receiving and paying for merchandise are divided among several departments.
C) The system limits the individuals that can incur cash payment obligations for a company.
D) It is applied to purchases of merchandise inventory and all other expenses.
E) It is not necessary if the supplier provides both receiving report and invoice with the merchandise shipped.

F) None of the above
G) C) and D)

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Question 32

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Two sales clerks not being permitted to share the same cash register is an example of the internal control principle of _______________________.

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Question 33

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Clearly establishing responsibilities and assigning all accounting activities to one person is an important principle of internal control.

On March 1, a company established a $75 petty cash fund. On March 12, the petty cash fund contains $3 in cash and the following paid petty cash receipts: transportation-in on merchandise inventory $14.25; postage, $19.50; and office supplies, $36. Give the general journal entry to reimburse the fund and to increase its amount to $150 on March 12.

A voucher is an external document used to accumulate information to control cash disbursements and to ensure that a transaction is properly recorded.

Maintaining adequate records is an important internal control principle.

Which internal control principle prescribes the use of pre-numbered printed checks?

A company reported net sales for 2014 of $265,000 and $545,000 for 2015. The year-end balances of accounts receivable were $39,000 for 2014 and $92,000 for 2015. Calculate the days' sales uncollected at the end of each year for this company and describe any changes in the apparent liquidity of the company's receivables.

The net method for recording purchases records the purchase invoice at its gross amount and records cash discounts in the Merchandise Inventory account.

Technologically advanced accounting systems rarely need monitoring for errors because computers always process transactions correctly.

The voucher system of control:

Ferguson Co. decides to establish a petty cash fund with a beginning balance of $200. The company decides that any purchase under $25 can be processed through petty cash instead of the voucher system. The journal entry to record establishing the account is:

Internal controls are crucial to companies that convert from U.S. GAAP to IFRS because of all of the following risks except:

Basic bank services do not include:

A ___________ is an internal document (or file) that is used to accumulate information to control cash disbursements.

A __________________________ is a document explaining the payment of a check.

Describe a petty cash account and its purpose.

Since petty cash is concerned with such small amounts of cash, it is not necessary to document all transactions with a petty cash receipt.

Money orders, cashier's checks, and certified checks are all examples of cash.

If a check that was outstanding on last period's bank reconciliation was not among the cancelled checks returned by the bank this period, in preparing this period's reconciliation, the amount of this check should be: